Motivation and compenstion

The effects of compensation policies on workers motivation.

In order to remain competitive, you need qualified and motivated staff members to effectively run your business. Although advances in medical and computer technologies have required a more educated workforce, the renewed focus on service quality and delivery has required superior skills, attitudes and abilities. Additionally, the low unemployment rate and tight labor market have created additional challenge in attracting, retaining and motivating these qualified individuals.
Economic theorist have extensively studies the importance of compensation under asymmetric information ( see for example, Hart and Holmstrom 1987; Salanie 1994; Macho-stadler and Perez-castrillo 2001). With the field of labor economies much attention has forced on nature of optimal compensation between firms and their employees ( for example, Lizear 1986, and Gibbons 1987). These models stress the importance of compensation policies as a determinant or motivation of employees and firms performance. Many researchers have, therefore, examined the empirical relevance of agency models by testing for presence of such compensation effects ( see, for example, Ehrenberg 1990 and the paper contain therein. The ability of compensation to affect employees performance also takes on policy dimension both at the firm level, where mangers may want to evaluate the benefit of different policies ( Milgrom and Robert 1992; Lazear 1998), and at the macroeconomic level, where some economist ( notably Blinder 1990) have highlighted the benefits of a widespread adoption of performance-pay compensation.
Definition of compensation
According to the Encarta Microsoft dictionary 2009, compensation is defined as money in payment for loss: an amount of money or something else given to pay for loss, damage, or work done. Compensation is also defined as the total reward received by an employee in exchange for services performed for an organization. It can include both direct pay (salary and wages) and indirect pay (benefits programs).
Compensation of employees is the total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the latter during the accounting period.
Compensation is payment to an employee in return for their contribution to the organization,
that is, for doing their job. The most common forms of compensation are wages, salaries and
tips.
Definition of Policies
Broadly defined, policy means a set of procedures that has been agreed upon by an organization for dealing with other organizations or situations. It's often used in the political sense to mean a set of principles that an administration employs to deal with another country or a particular domestic problem.
Who is an employee?
An employee is an individual who was hired by an employer to do a specific job. The employee is hired by the employer after an application and interview process results in his or her selection as an employee.
Definition of motivation
According to the Wikipedia free encyclopedia Motivation is the driving force by which humans achieve their goals. Motivation is said to be intrinsic or extrinsic.[1] The term is generally used for humans but it can also be used to describe the causes for animal behavior as well. According to various theories, motivation may be rooted in a basic need to minimize physical pain and maximize pleasure, or it may include specific needs such as eating and resting, or a desired object, goal, state of being, ideal, or it may be attributed to less-apparent reasons such as altruism, selfishness, morality, or avoiding mortality. Conceptually, motivation should not be confused with either volition or optimism. Motivation is related to, but distinct from, emotion.
Motivation is also defined as a desire to achieve a goal, combined with the energy to work towards that goal. Students who are motivated have a desire to undertake their study and complete the requirements of their course.